Denise Sangster, president of Global Touch, is a distribution
consultant for U.S. software and peripherals firms that are building
overseas markets. She has spent most of this year in Europe, talking
with publishers, developers, and resellers; we asked her to summarize the trends she discovered:

We keep hearing reports about "softness" in the European market. True?

"The market is very soft, and one reason is that buyers are
finally reacting to high price levels that were set in 1985, when the
dollar was extremely strong. Since last November, hardware prices have
totally crashed in Europe, from 30%-40% above U.S. retail levels to
about 5% higher. Now that hardware prices have come down, all of a
sudden buyers are saying, 'We're not going to pay these
exorbitant software prices any more. '"

Has price sensitivity affected the whole European market?

"Yes--there's been a fundamental change in buying
patterns. People are buying much more through direct channels, and
they're willing to travel further to get more variety and better
prices. In addition, distributors and multinationals are putting
pressure on vendors to come up with one price that applies across the
board in Europe. Right now, there's not a lot of price parity from
country to country. Microsoft in particular is trying to bring all its
various European prices--except for those in the U.K.--to within 15% of
each other within a year. That's going to be a very distinct
competitive advantage."

Has price competition affected European resellers, who were
supposed to be delivering extra support in return for high margins?

"The European channel is working with extremely anemic margins. Merisel says that 18% of dealers in France went bankrupt in
1991, and that means somebody--primarily local distributors--got left
holding bad invoices. The situation is made worse by the record high
interest rates in Europe these days, which put a terrible financial
burden on the channel. Analysts are saying that 80%-90% of distributor
gross margins are tied up in providing financing to dealers. So
there's really no money left to provide local support."

Do you expect that U.S. companies will begin to play a larger role
in local support?

"The truth is, there's been very little reinvestment of
revenues in the European market--as little as 1% for companies outside
the top ten. Today, when U.S. software companies are generating almost
half of their sales from overseas markets, that's not reasonable.
The key to being successful in the future will be to work more in
partnership with local resellers to provide a higher level of
support."